Does Ukraine’s Deal with Russia Signal Beginning of the End of the Crisis – or Just the End of the Beginning?

December 20, 2013
James George Jatras
Deputy Director, AIU

The December 17 agreement in Moscow between Presidents Viktor Yanukovych and Vladimir Putin to support Ukraine’s debt payments and significantly cut energy prices is a major development in the ongoing political standoff in Kiev and in the triangulation among the European Union (EU), Ukraine, and Russia. The question now is, does the agreement start to move Ukraine out of the political, economic, and fiscal cul-de-sac the country has found itself in for the past month, or does it only set the stage for a much worse, possibly bloody, crisis to come?

To start with, it is necessary to take note of the fact that the Moscow deal definitively exposes the emptiness of Brussels’ rhetoric, compared to Russia’s willingness to engage materially, meaningfully – and immediately. Despite conflicting reports from western officials as to whether the Association Agreement (AA) had been pulled off the table, it’s now clear that Ukraine simply could not sign the agreement as presented without pushing the country over a cliff. One Western critic of Yanukovych characterized his declining to sign the AA at Vilnius as wanting “a free bag of money with no strings attached.” But in fact, what Brussels was offering Ukraine was lots and lots of strings and no bag of money.

By contrast, the Moscow package is quite a “bag of money” indeed: Russia’s purchase of $15 billion (€10.9 billion) worth of Ukrainian government bonds and slashing gas prices by a third, from over $400 (€291) per 1,000 cubic meters to $268.50 (€195). This is not only the difference between whether Ukraine can continue to service its existing debt, it’s direct relief to Ukrainian consumers and – surely not lost on Yanukovych – a welcome shot in the arm for industries in Donetsk and other pro-Party of Regions parts of Ukraine, shoring up his political base. As noted by the New York Times, it throws “Yanukovych an economic and political lifeline that will spare him for now from negotiations with the International Monetary Fund, Europe or the United States.”

Does this mean that Ukraine has now decided to “choose Russia over Europe”? No. Rather, with intelligent follow-up the Moscow deal can serve at as a catalyst to reconcile not only Ukraine’s need to balance ties with Russia and the EU but between Russian and Europe, with Ukraine acting as a bridge. More critically, it opens the door for the Opposition to step back from the brink of the abyss on which they have been standing for a month.

First, the Europeans. Perhaps conscious that their “no bag of money” bluff has been called, European officials are now directing a more flexible message to Moscow. In a meeting in Brussels this week between European officials and Russian foreign minister Sergei Lavrov, it now appears that the European side may finally be willing to take into account aspects of the AA with Ukraine that Moscow considers detrimental to its own economy, specifically a massive flow of EU products into Russia via Ukraine. After the discussions, Lavrov said there was “a common agreement that everyone should respect the sovereignty of each nation” and “allow people to make a free choice.” With any luck, a consensus on the basic issues involved and the legitimate interests of all concerned could lead to a enhanced talks on trade ties between the EU and the Moscow-led Customs Union (CU), as well as between Ukraine and both the EU and CU.

As for the Ukrainian Opposition, a more stark – and dangerous – choice needs to be made: either to abandon irresponsible talk of “revolution” and accept Yanukovych’s invitation to work with him for a better deal with Europe than the AA; or to incite a final showdown for total power.

Despite the presence of high-profile Western (including American) figures in Kiev expressing solidarity with the Opposition, it would be a mistake for the anti-Yanukovych forces to overestimate the extent of Western support. As noted in TIME magazine (one of the top voices of the U.S. liberal establishment)

“But taking inspiration and posing for pictures is one thing. Offering membership and financial bailouts is another. So far, no one is inviting Ukraine to join the E.U., which has had enough trouble in the past few years absorbing the troubled economies of Romania and Bulgaria. This week, the rotating presidency of the E.U. went from Lithuania, which has championed Ukraine’s integration with Europe, to the debt-wracked nation of Greece, which has little patience for charity cases other than its own. So in the next few months, just as Ukraine edges toward financial ruin, the concern of its Western neighbors will likely fade away.” [S. Shuster, “Western Diplomats Are Going to Disappoint Ukraine’s Protesters,” December 13]

That may leave the most radical elements (who are getting increasing critical attention Western media) with just one option: to provoke a violent provocation that can be marketed abroad as brutal repression instigated by the authorities (who have no intelligent reason at this juncture to use force) in the hopes of shifting the dynamic against Yanukovych and perhaps even bringing down international sanctions.

That danger should not be underestimated in the aftermath of the Moscow deal. One protester in Kiev warned if Yanukovych signed any accord with Russia there “would be blood and war.” Predictably, “Svoboda” leader Oleh Tyahnybok has threatened: “The Kremlin wants to take its revenge on Ukraine, divide Ukraine and drown it in blood. We forbid this president to sign anything in Moscow that contradicts the interests of the Ukrainian state.” It doesn’t take a detective to figure out from where the real threat of violence comes.